How the without prejudice rule works

22 July 2022 | Raj Laxman

Occasionally an employer may find themselves involved in a dispute with an employee and they may feel the only way out is to exit the employee from the company due to a loss of trust and confidence. The employer may therefore wish to end the employees’ contract on amicably agreed terms. The reasoning being to act quickly and avoid lengthy internal procedures such as redundancy, capability, and disciplinary proceedings. Employers may not have sufficient grounds for these formal procedures but may feel the employee’s mutually agreed exit is the interest of the company and the employee.

Legal Advice

In the employment law context, the without prejudice rule applies where the employer and employee have an existing dispute. An employer should not apply it to just any or all communications. It should specifically be used when there is a complaint, potential claim, or a dispute. A protected conversation on the other hand can be used in a situation where there is no existing complaint or claim. The content of without prejudice discussions and communications cannot be referred to in a claim for standard unfair dismissals. It can however apply in situations of discrimination and dismissal that are automatically unfair as well as cases of whistle blowing. Employer should therefore seek legal advice before entering without prejudice discussions with their employee.

The purpose of the without prejudice rule is to enable parties to engage in discussions to settle disagreements with the knowledge that what has been discussed in relation to admissions or an offer of settlement cannot be used as evidence in the event the discussions are not successful. The without prejudice rule applies to both written and verbal statements made in a genuine attempt to settle a dispute.

The without prejudice rule should not be abused

There are however exceptions to the without prejudice rule. It should not be misused and abused. Examples of this include undue pressure and unambiguous impropriety. Employers’ actions during discussions should always be professional and reasonable. There are criminal liabilities if the employer engages in extortion and lying under oath for misleading the court.

For an Employment Tribunal to admit a without prejudice statement due to unambiguous impropriety it must be shown that the evidence reasonably establishes the unambiguous impropriety. 

The following case demonstrates the unambiguous impropriety rule.

In the case of Swiss Re Corporate Solutions Ltd v Sommer, Swiss employed Mrs Sommer as a political risk underwriter. In July 2020 Mrs Sommer returned from maternity leave and Swiss told her position was at risk due to redundancy. She raised several grievances and copied the emails to herself and her husband’s email address. All her grievance were not accepted by the employer. The employer informed her the emails she sent to her home email address were a data breach and breach of confidentiality.

Mrs Somers issued proceedings in the Employment Tribunal on the 22 January 2021. Her employer’s solicitor then served on her a without prejudice letter. The letter proposed to end her employment and offered a payment of compensation by way of a settlement agreement. The without prejudice letter set out allegations against Ms Somers. The without prejudice letter said the conduct was criminal and the outcome of a disciplinary would be a summary dismissal. She would be reported to the Financial Conduct Authority, and this would make it difficult to work in the regulated sector. The letter offered a settlement agreement and the figure she would receive £37000.

On the 16 April 2021, Mrs Sommer was dismissed on the grounds of redundancy. She issued more Employment Tribunal proceedings on the 28 April. She argued the without prejudice letter had an unambiguous impropriety and as a result she should be allowed to admit it as evidence.

The Employment Tribunal ruled in her favour and said the without prejudice letter should be admitted as evidence. The judge felt the letter had improper threats and pressure to sway the employee to accept the settlement agreement. This stood for an exploitation of the without prejudice privilege. The employers’ solicitors appealed on the ground of a legal misdirection by the Judge in relation to an unambiguous impropriety. They argued there were no basis for the Judges assertions.

The matter then went on appeal to the Employment Appeal Tribunal. It held that the without prejudice letter was inadmissible as evidence in the Employment Tribunal. The Employment Appeal Tribunal concluded that the Employment Tribunal Judge made several mistakes. There were no merits for the accusations made about the without prejudice letter. The Employment Tribunal Judge made a reference to accusations of serious misconduct without basis and hence this was an error.

The Employment Appeal Tribunal stated the importance of the principal of the without prejudice rule and how the employer and employee in an existing dispute should engaged without fear of the discussions being presented in the Employment Tribunal. The unambiguous impropriety exception should only be used in the clearest instances of abuse of a privileged circumstance.

Employers who are considering the entering without prejudice discussions are recommended to obtain legal advice from the Quest Advice Line. Taking legal advice before drafting a without prejudice letter can avoid the risk making an unambiguous impropriety. Quest can also help you with the drafting of settlement agreements. Call us on 01455 852028.

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